Trackers bale out of Footsie casualties

Market Report

THE SEEMINGLY remorseless slide goes on. Footsie crashed 101.7 points to 4,648.7, its lowest since June last year.

Banks, despite a modest Barclays rally, remained under pressure and some of the recently high-flying telecoms shares were again earthbound.

Such is the state of the market that there is already a tendency for some tracker funds to try and position themselves for the next Footsie review, not due until December.

WPP, the advertising group, is a classic example of anticipating the Footsie judgement. The shares have, like so many others, been completely demoralised but their discomfort has intensified in recent days as Footsie considerations have mingled with the obvious vulnerability of the advertising industry in a possible recession.

The shares had the dubious distinction of leading the latest retreat, falling 36.5p to 202p against a 1998 high of 476p. On present form WPP is a Footsie casualty; its valuation has fallen below pounds 1.8bn.

The trackers are already taking evasive action by selling the shares. They are adopting a similar approach to other Footsie shares in the danger zone such as fund manager Amvescap, down 27p at 263p, and Sema, off 34p to 376p.

As WPP and the others weaken the pressure becomes more intense as the action of the tracker funds make relegation an (almost) self-fulfilling development.

The mid cap index is another area of anxiety. On Friday Business Post, down 22.5p to 252.5p, and engineer Laird, up 13p to 158p, were thrown out to accommodate the two Hillsdown spin offs. Hillsdown, at 100p, and offspring Terranova, 140p, and Fairview Homes, 102.5p, collectively produced a modest but commendable gain.

Footsie's latest fall was achieved against another somewhat unexpected slump in New York and yet further Tokyo weakness. Soothing words after the G7 meeting had no impact and even a UK interest-rate cut on Thursday may be ignored unless it is significant - say, 0.75 percentage points.

Barclays ended its headlong plunge, although a 29p rally to 867p was far from convincing as it denied that it intended to sell Barclays Capital, its investment banking albatross.

British Energy, up 11p to 576p, enjoyed investment house Merrill Lynch support following what was seen as an upbeat output statement. National Power improved 10.5p to 567p after selling some exploration assets to little Dana Petroleum; NP has lifted its Dana stake to 8.56 per cent and picked up pounds 9.4m.

Talk of corporate action creating mega-utilities was also in the air, helping NP as well as PowerGen, up 12.5p to 886.5p. A weaker pound comforted exporters, with British Aerospace up 20p to 332p, and General Electric Co 17.5p to 417.5p.

Marks & Spencer fell 21p to 437p as BT Alex.Brown, worried about a possible sharp deterioration in trading in the past month, slashed its profits forecast by 3 per cent to pounds 1.025bn. For next year the cut is 10 per cent to pounds 1.13bn.

Railtrack, which has for long blissfully ignored the screeching market brakes, was for once shunted into reverse, falling 59p to 1,575p. The company, at a 1,713p peak last week, met analysts last night. It has fixed up a deal with British Land, down 20p at 523p, to develop more land at Railtrack's Broadgate site in the City. Merrill downgraded its BL stance, citing a deterioration in the outlook for City office demand while financial markets are volatile.

Zeneca, down 107p to 1,873p, was hit by Merrill selling. Computers remained in the doghouse; besides Sema, Admiral plunged 210p to 872.5p and CMG 169p to 1,241p.

The cut-price Inchcape sale of its Russian Coca-Cola operation killed off what sparkle was left at Coca-Cola Beverages, sending the shares down 11p to 106.5p; Inchcape dropped 6p to 105.5p.

Danka Business Systems, with another dismal trading statement, crashed 36.5p to 44p; last year the price was 712p. Engineer Headway reported a profits gain, but with bid talks ended the shares fell 10.5p to 39p.

Calluna, the computer security group, fell 1.5p to 14p despite Williams de Broe support and Weir, the engineer, gained a further 6.5p to 187.5p, seemingly on a pounds 14m pump development.

Waverley Mining held at 9.5p. Corporate Resolve, an Ofex traded company, is bidding for 26 per cent but other possible bidders are said to be on the sidelines.

Former chief executive Willie McLucas is one; an Australian miner is also thought to have expressed interest. There are also suggestions that Anglesey Mining, unchanged at 6.75p, might attempt a share exchange offer.

Nord Anglia, an educational group, slumped 30p to 213p as ABN Amro cut its estimate. It is thought to have been reduced from pounds 5.7m to pounds 3.8m.

SEAQ VOLUME: 835.8 million

SEAQ TRADES: 73,444

GILTS INDEX: 115.46 -0.52